Tips

Throughout most of the 20th century accounting was considered a staid and rather boring profession. Accountants were derided as “bean counters” by people from other parts of the business who felt that it was they themselves that created the value and services and the accountants where just there to keep score. That began to change in the last quarter of that century as financialisation and financial engineering came to the fore. No longer was accounting seen as boring but necessary, but was now viewed as a place where outsized profits could be created seemingly out of thin air.

By the dawn of the 21st century the accounting department had become in many companies the most important department for generating profits. Financialisation and financial engineering to generate earnings and wealth had become the norm. Increasingly, industrial businesses would attempt to improve earnings or increase share prices through creative accounting techniques rather than real changes in how they produced the goods and services they sold to customers. It is now generally accepted that profound changes can be achieved simply by changing how you count the numbers. That it is often more important how you count, than what you do.

As we face one of the most difficult environmental threats to face humanity since the ice age many are now wondering if this sort of creative accounting can help us defeat climate change. Which is not to say we change the accounting just to mask the problem, what is being considered is how changes to accounting can affect how companies behave and whether those rules can be made to punish behaviour that is damaging to the environment and conversely rewarding to behaviours that benefit the environment. Which has spurred the emergence of a new branch of accounting called environmental accounting.

It is already obvious how simple changes in rules can drive economic growth and bring about economic prosperity. The changes in China are nothing short of miraculous. This last half century we have seen more people lifted out of poverty than at any time in human history. The challenge now is being able to deliver the same sorts of growth but without it being accompanied by environmental damage that China has had to face as a consequence. Can we change the world by changing accounting? There are many that believe we can.

If we can put a price on the environmental damage done by a specific activity we can change the rules so that those doing the damage have to account for it. It is only fair that those who are using up a resource that is of benefit to us all, that they account for the cost and not for the rest of us to bear it collectively. Conversely if you can put a price on a damaging activity you can place a price on something that benefits us all and a way of having all of us reward that activity. It may end up be the sweetest irony of all if the same creative accounting techniques that have been responsible for privatizing profits and making public liabilities can be made to do the opposite.

Director of Accounting for Private Educational Institutions at Jefferson+Partners (Sydney) from 2007-2015. Founded and led Lebrau & Partners Pty. Ltd. from 2015 until now - a boutique accounting firm serving educational institutions across the Asia Pacific (both public and private, primary, secondary and tertiary institutions).